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A semi-endogenous growth model with public factors, imported capital goods, and limited export demand for developing countries

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  • Jan Simon Hallonsten
  • Thomas H.W. Ziesemer

Abstract

We build a semi-endogenous growth model for developing countries with non-rivalrous public factors, imported capital goods, and an export demand function. The model exhibits the three-way interaction between public and private investment and trade shown recently in the empirical literature. A parameter for government-investment inefficiency has transitional growth effects distorting between public investment and private capital, consumption, and exports, the latter biasing the terms of trade. Our analysis of a vector error-correction model (VECM) for Trinidad &Tobago shows that additional expenditure for public investment increases output less than taxes decrease per capita consumption and therefore is sub-optimal there. Both temporary and permanent shocks on public investment have level effects supporting semi-endogenous growth modeling and demonstrate that the VECM effects are in line with the logic of the theoretical model; terms of trade are endogenous.

Suggested Citation

  • Jan Simon Hallonsten & Thomas H.W. Ziesemer, 2019. "A semi-endogenous growth model with public factors, imported capital goods, and limited export demand for developing countries," Journal of Applied Economics, Taylor & Francis Journals, vol. 22(1), pages 380-402, January.
    • Handle: RePEc:taf:recsxx:v:22:y:2019:i:1:p:380-402
    DOI: 10.1080/15140326.2019.1627726
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    Citations

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    Cited by:

    1. Thomas H. W. Ziesemer, 2023. "Semi-endogenous growth in a non-Walrasian DSEM for Brazil: estimation and simulation of changes in foreign income, human capital, R&D, and terms of trade," Economic Change and Restructuring, Springer, vol. 56(2), pages 1147-1183, April.
    2. Sasaki, Hiroaki & Fukatani, Noriki & Imai, Daisuke & Kamanaka, Yusuke, 2022. "Sustainable Economic Growth in an Economy with Exhaustible Resources and a Declining Population under the Balance-of-Payments Constraint," MPRA Paper 113559, University Library of Munich, Germany.
    3. Kei Hosoya, 2024. "Endogenous time preference and infrastructure-led growth with an unexpected numerical example," Portuguese Economic Journal, Springer;Instituto Superior de Economia e Gestao, vol. 23(1), pages 3-32, January.
    4. Önder Nomaler & Danilo Spinola & Bart Verspagen, 2024. "Demand‐led industrialisation policy in a dual‐sector small open economy," Metroeconomica, Wiley Blackwell, vol. 75(3), pages 339-376, July.

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